The Office of General Counsel issued the following informal opinion on November 14, 2002, representing the position of the New York State Insurance Department.
Re: Exclusions and Sublimits for Acts of Terrorism in Fire Policy
Questions Presented:
1. May a policy subject to the requirements of N.Y. Ins. Law § 3404 (McKinney 2000) contain an exclusion regarding the peril of fire following an act of terrorism?
2. May a policy subject to the requirements of N.Y. Ins. Law § 3404 contain a sub-limit regarding the peril of fire following an act of terrorism?
Conclusion:
1. No, a policy subject to the requirements of N.Y. Ins. Law § 3404 may not contain an exclusion regarding the peril of fire following an act of terrorism.
2. No, a policy subject to the requirements of N.Y. Ins. Law § 3404 may not contain a sub-limit regarding the peril of fire following an act of terrorism.
Facts:
The general inquiry contained no specific facts. It related to both authorized and unauthorized insurers.
Analysis:
N.Y. Ins. Law § 3404 (McKinney 2000) provides that no insurance policy may provide coverage with respect to the peril of fire that is not at least as favorable to the insured as that provided for in the standard fire policy, which is contained in § 3404. No insurer may issue a fire insurance policy on any property in this state containing an exclusion not specifically permitted under § 3404. Since a terrorism exclusion is not one of the permissible exclusions that are specified in the standard fire policy and the addition of such exclusion would have the effect of narrowing the coverage otherwise provided under the standard fire policy, this Department has previously concluded that no policy of fire insurance made, issued or delivered on any property in this state may contain a terrorism exclusion with respect to the peril of fire. 1
A sublimit in regard to a fire following an act of terrorism would be a limitation on the fire coverage and thereby would provide coverage less favorable than that required by § 3404. Accordingly, no sublimit in regard to the fire coverage is permissible.
The above opinion applies to both policies written by authorized insurers and excess line insurers.
For further information you may contact Principal Attorney Paul A. Zuckerman at the New York City Office.
1 In all respects in which a provision of an insurance policy violates the requirements or prohibitions of the Insurance Law, the policy is enforceable as if it conformed to such requirements or prohibitions. See N.Y. Ins. Law § 3103 (McKinney 2000); Bersani v. General Accident Fire & Life Assurance Corp., 36 N.Y.2d 457, N.Y.S.2d 108 (1975).